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Cut Departure Tax To Boost Trans-Tasman Aviation, Industry Says

by Mary Swire, Tax-News.com, Hong Kong

14 August 2014


Australia's Tourism and Transport Forum (TTF) has called on the Government to boost trans-Tasman travel by cutting the Passenger Movement Charge (PMC) from AUD55 (USD51.10) to no more than AUD25 for all New Zealand destinations.

The recommendation is made in a major new TTF report, Bringing Our Neighbour Closer, which suggests ways to increase visitor numbers from New Zealand.

The PMC was introduced in 1995. The TTF claims that "the justification for a differentiated rate for New Zealand routes lies in the inherent poor design of the PMC as a tax." It is not based on distance travelled, it points out.

The TTF says that the revenue generated by the PMC is now significantly more than the amount needed to fund its border agencies. Revenue is forecast to hit more than AUD1bn by 2016-17, while spending on passenger facilitation at the country's international airports is predicted to drop to AUD239m.

According to the TTF, the PMC can add 18 percent to the cost of the cheapest low-season return air fare. The report cites modelling by the International Air Transport Association (IATA) that shows that leisure travelers are the most sensitive to tourism taxes, such as the PMC. It is estimated that with every price increase of ten percent, there will be a decline of five to seven percent in the number of leisure passengers travelling.

The TTF argues that removing the PMC altogether would increase demand by more than ten percent under the IATA model. It also contends that the savings to airlines could translate into a 13 percent additional yield. This could underwrite new route development or enable airlines to reduce fares or boost seat capacity on existing routes.

In the past the TTF has advocated a halving of the PMC for all New Zealand destinations. This call was last made when the rate was AUD47. Halving it now would make it AUD27.50. Therefore, for the sake of simplicity, it is now recommending that the PMC be slashed to AUD25.

TAGS: tax | air passenger duty (APD) | aviation | Australia | tax rates | New Zealand | tax reform | trade association | trade

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